BTC Volatility, Tech Corrections, & AI Infrastructure Race

This Week in Crypto

Bitcoin faced significant headwinds this week, testing the resolve of long-term holders as macro uncertainty weighed on risk assets across the board.

• Bitcoin dropped below $70,000 yesterday, falling to its lowest level since October 2024. The move represents a roughly 48% decline from October’s all-time high above $125,000. 

• The selling accelerated Thursday as liquidations hit hard, with leveraged positions getting flushed out across the market. 

• Ethereum dropped below $2,000, while Solana, XRP, and other major altcoins posted similar double-digit weekly losses. 

• The Crypto Fear & Greed Index plunged to "Extreme Fear" territory at 11, marking one of the most pessimistic sentiment readings in recent memory.

So, what’s driving the pressure? Several factors converged this week.

• President Trump’s nomination of Kevin Warsh as the next Fed Chair spooked markets, as Warsh is seen as favoring tighter monetary policy and higher real interest rates - traditionally challenging conditions for risk assets like bitcoin.

• Tech stocks also came under pressure this week, and bitcoin moved closely with the Nasdaq.

• Bitcoin ETF flows reflected the volatility. 

  • The week started rough, with January 29 alone seeing $818M in outflows, and November through January marking the longest sustained outflow streak since these products launched. 

  • However, February 3 brought a reversal - $562M in net inflows, the largest single day since January 14, led by BlackRock’s IBIT and Fidelity’s FBTC. The one-day bounce showed institutional buyers stepping in at lower levels, though flows turned negative again Tuesday.

There is some silver lining:

• Corrections like this tend to flush out leverage, reset sentiment, and create opportunities for those with conviction in bitcoin’s long-term fundamentals.

• Despite bitcoin being down roughly 40% from its October high, US ETFs still hold about 1.3M BTC - only 5% below their peak holdings - indicating many institutional holders are maintaining positions rather than capitulating. 

This Week in TradFi

Equity markets had a rough week as investors rotated out of high-flying tech stocks amid concerns about AI spending and valuations.

• On Thursday, the S&P 500 fell 1.23% - slipping into negative territory for 2026 - while the Nasdaq declined 1.59% and the Dow dropped 592 points. 

• The selloff intensified throughout the week as multiple big tech companies revealed massive AI infrastructure spending plans. 

• Alphabet spooked investors by projecting capital expenditures of $175-$185B for 2026, raising concerns about free cash flow despite beating earnings estimates. 

• The market's anxiety centers on whether the enormous AI infrastructure investments will generate returns quickly enough to justify current valuations.

• The risk-off rotation extended beyond tech - healthcare stocks also came under pressure as companies issued cautious earnings outlooks amid uncertainty surrounding drug pricing reforms and reimbursement policies. 

• Despite the headline index weakness, market internals showed signs of broadening strength.

  • The equal-weighted S&P 500 outperformed the cap-weighted index, suggesting investors are rotating into a wider range of stocks rather than abandoning equities entirely. 

  • Energy stocks surged as geopolitical tensions between the US and Iran drove oil prices higher.

This Week in Tech

In the most ambitious game of financial chicken yet, Alphabet announced it will spend between $175-$185B on AI infrastructure in 2026 - more than double the $91.4B it spent in 2025 and significantly more than the $119.5B analysts were expecting. 

• To put that in perspective, Alphabet is planning to spend roughly the GDP of Hungary on data centers and GPUs this year.

• The announcement sent Alphabet shares down as much as 5% because even in the current "spend infinite money on AI and figure it out later" environment, doubling your capex budget makes people nervous.

• When asked what keeps him up at night, Pichai cited "computer capacity," pointing to "potential bottlenecks in power, available space and components".

  • Google's cloud backlog surged 55% sequentially to hit $240B, and Gemini now has 750M monthly active users, so they might actually need all this capacity. Or everyone’s collectively lost their minds. Probably both!

• The company beat earnings expectations across the board, but nobody cared because the spending number was so comically large it overshadowed everything else.

Not to be outdone in the "who can spend the most absurd amount of money" competition, Amazon announced it will spend $200B on AI infrastructure in 2026 - a 50% increase from 2025 and $50B more than analysts were expecting.

• Investors responded to this news by immediately panic-selling the stock, which dropped 8-11%.

• The timing was particularly unfortunate since Amazon reported the news right after Alphabet's $185B announcement had already spooked markets. 

  • The surge in spending has revived comparisons with the dot-com era boom, which helped build the modern internet but delivered only modest returns for many companies that financed the infrastructure.

As usual, below are some fundraising announcements, M&A, and tech personnel changes that caught our eye:

• An AI lab called Fundamental emerged from stealth yesterday with $255M in funding at a $1.2B valuation. 

• Voice AI company ElevenLabs has raised $500M at a valuation of more than $11B. 

• Semiconductor startup Positron has raised $230M in Series B funding, bringing the company to a valuation of more than $1B. 

Arch is building a next-gen wealth management platform for individuals holding Alternative Assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto.

Disclaimer: None of the above is financial advice, seriously.